Information Paper for the
Legislative Council Panel on Housing

Tenants Purchase Scheme

PURPOSE

To brief Members on the latest position of Tenants Purchase Scheme (TPS) Phase 1 and provisional arrangements for TPS Phase 2.

TPS PHASE 1

Sales

2. Tenants of 26,896 flats in TPS Phase 1 were invited to submit offers to buy in January 1998. As at 31 October, 17,148 (64%) had made an offer and submitted intention money of $2,500. Assignments have been executed for 14,772 (55%). Tenants who have not yet offered to buy have been reminded that the period for the special credit ends on 31 December 1998. Some 450 vacant flats in TPS Phase 1 estates will be offered for sale to Green Form purchasers (i.e. current and prospective public housing tenants) under Home Ownership Scheme Phase 20A to be launched in December 1998.

Withdrawals

3. A breakdown of offers and assignments by estate is at Annex A. Also shown is the number of withdrawals prior to acceptance by the Housing Authority (HA) and rescinded cases after acceptance.

4. A breakdown of the reasons for withdrawal/rescission is at
Annex B. The most common reason given was dissatisfaction with the Government Lease and Deed of Mutual Covenant (DMC). Exceptionally, for Phase 1, it was necessary for sale of flats to proceed before the Government Lease and DMC were finalised. Although the terms of the Lease and DMC were not less favourable than those indicated in sales brochures, the need to confirm minor amendments to owners' rights and obligations at a late stage led to some misunderstandings. Since withdrawal for reasons of dissatisfaction with Lease and DMC entitled purchasers to a full refund, while withdrawal after acceptance for other reasons did not, the stated reasons for withdrawal need to be interpreted with caution.

5. Of the 957 families withdrawing as shown in Annex B, 357 families have now resubmitted offers.

Repairs

6. Details of the requests for minor maintenance to flats on sale and progress are at Annex C.

7. Of the 26,017 requests received, 1,953 were for Tenant-to-Pay items. A list of the most common items and charges is at Annex D.

TPS PHASE 2

Schedule

8. The Home Ownership Committee (HOC) of the Housing Authority will consider pricing and other details for six TPS estates (27,161 flats) comprising TPS Phase 2 in early 1999. The followings are provisional proposals pending the approval of the HOC.

Pricing

9. The pricing of TPS Phase 2 flats will follow the pricing formula approved by the Housing Authority, which provides for the calculation of a list price based on the Adjusted Replacement Cost (ARC), with a special credit to ensure affordability (total housing monthly expenditure after purchase for most families to be between 1.5 and 2 times rent). Preliminary calculations show that the ARC is currently very close to the level at the time of approval of Phase 1 TPS. As for Phase 1, a first year and a second year credit would continue to be offered. End prices would therefore be close to those for Phase 1.

Maintenance

10. As for Phase 1, estates selected for sale are generally in good maintenance condition. Some minor upgrading to security systems and ground floor lift lobbies is in hand and will be completed prior to sale.

11. Given the large number of requests for minor repairs within their flats received for Phase 1, Phase 2 tenants were invited to submit requests at an early date (in August 1998) to ensure the Housing Authority can complete all such repairs before tenants are invited to offer to buy. Details of the requests received are at Annex E. It is expected that all repair works will be completed before March 1999.

Land Rights and Obligations

12. The terms of a DMC for Phase 2 are now being prepared and will be finalised before sale. The DMC will provide an explicit allocation of rights and obligations on the basis of undivided shares and management shares. The Government Leases and DMCs for each estate will be available for purchasers' perusal before sale.

FUTURE PROGRAMME

13. We have announced estates to be included in TPS Phases 3 and 4. We are now identifying suitable estates for inclusion in the programme from Phase 5 onwards. We will make a recommendation on the selection of estates for Phase 5 to the HOC for approval in mid 1999.

Housing Department
December 1998

Annex A

Tenants Purchase Scheme Phase 1Position as at 31.10.98

(a)

Estate

(b)

Offers

(c)

Withdrawn Offers

(d)

Live Offers (b)-(c)

(e)

Offers accepted by HA

(f)

Offers rejected

(g)

Offers rescinded

(h)

Live accepted Offers

(i)

Assignments

Cheung On

5,251

167

5,084

4,888

0

290

4,598

4,592

(71.56%)

(2.28%)

(69.28%)

(66.61%)

(0.00%)

(3.95%)

(62.66%)

(62.58%)

Fung Tak

2,918

24

2,894

2,679

4

142

2,537

2,384

(55.19%)

(0.45%)

(54.74%)

(50.67%)

(0.08%)

(2.69%)

(47.99%)

(45.09%)

Heng On

4,075

27

4,048

3,794

0

79

3,715

3,556

(69.57%)

(0.46%)

(69.11%)

(64.78%)

(0.00%)

(1.35%)

(63.43%)

(60.71%)

Kin Sang

1,737

33

1,704

1,589

1

43

1,546

1,442

(65.50%)

(1.24%)

(64.25%)

(59.92%)

(0.04%)

(1.62%)

(58.30%)

(54.37%)

Wah Kwai

2,063

67

1,996

1,870

7

43

1,827

1,648

(65.78%)

(2.14%)

(63.65%)

(59.63%)

(0.22%)

(1.37%)

(58.26%)

(52.55%)

Wan Tau Tong

1,428

6

1,422

1,235

2

36

1,199

1,150

(54.38%)

(0.23%)

(54.15%)

(47.03%)

(0.08%)

(1.37%)

(45.66%)

(43.79%)

Total:

17,472

324

17,148

16,055

14

633

15,422

14,772

(64.96%)

(1.20%)

(63.76%)

(59.69%)

(0.05%)

(2.35%)

(57.34%)

(54.92%)

Notes: figure in bracket represents percentage against total no. of saleable flats

1.Serial requests by tenants may result in requests received exceeding total number of flats for sale.

2.Includes cases reported completed by contractor and awaiting checking and certification by Housing Department. Most cases are completed within 4-6 weeks. In all 2,294 cases in progress, the requests were made within the 6 weeks period preceding 31.10.98.